Jabil shares sink on 2Q profit and 3Q forecast

Jabil Circuit Inc.'s shares sank Thursday after the electronics manufacturer reported a drop in its second-quarter net income and issued a weak forecast for its current quarter.

THE SPARK: The company reported Wednesday that it earned $88.5 million, or 43 cents per share, for the period that ended Feb. 28. Net income was $97.7 million, or 46 cents per share, in the prior year. Jabil made 53 cents per share in the recent quarter on an adjusted basis. Revenue increased 4 percent to $4.42 billion.

Analysts were expecting net income of 54 cents per share and $4.39 billion in revenue, according to FactSet.

Jabil forecast adjusted net income of 50 to 58 cents per share for its third quarter on $4.3 billion to $4.5 billion in revenue. Analysts expected net income of 61 cents per share and $4.53 billion in revenue on average.

THE BIG PICTURE: Jabil agreed to buy Nypro in February for $665 million, saying the deal will expand its materials manufacturing capabilities into the health care and consumer-packaging markets, and add depth to its consumer electronics business. The company said Wednesday that its costs related to the deal were about $5 million above its expectations for the second quarter. It thought most of that spending would happen in the third quarter.

THE ANALYSIS: Citi analyst Jim Suva noted that Jabil is increasing its sales but failing to increase its earnings per share, similar to what it reported in its last two quarters. The overall weakness in the economy also continues to make it difficult to accurately assess demand.

The analyst noted, however, that the company's sales came in higher than expected and its management team has reiterated a commitment to a dividend.

He maintained a target price of $23 and a Neutral rating.

SHARE ACTION: Shares fell 92 cents, almost 5 percent, to $18.56 by Thursday afternoon after dropping as low as $18.28 earlier in the day. The stock has fallen 28 percent in the past year.